Blick et al v. Soundview Home Loan Trust 2006-WF1
Filing
19
MEMORANDUM OPINION. Signed by Judge Norman K. Moon on 1/10/13. (jcj)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF VIRGINIA
CHARLOTTESVILLE DIVISION
KATHLEEN AND HAROLD BLICK,
CASE NO. 3:12-cv-00062
Plaintiffs,
v.
MEMORANDUM OPINION
SOUNDVIEW HOME LOAN TRUST 2006-WF1,
JUDGE NORMAN K. MOON
Defendant.
Plaintiffs Kathleen and Harold Blick originally filed this case in Albemarle County
Circuit Court on October 11, 2012, against Soundview Home Loan Trust 2006-WF1, as an
action to quiet title, essentially alleging that the assignment of their deed of trust was invalid.
Deutsche Bank National Trust Company, as Trustee for Soundview Home Loan Trust Company
2006-WF1 (“Deutsche Bank”) timely removed the case on November 14, 2012, and filed a
motion to dismiss for failure to state a claim the same day. For the following reasons, I will
grant Deutsche Bank’s motion.
I. BACKGROUND
This case arises from a residential mortgage foreclosure that was scheduled but has not
been executed. Plaintiffs previously filed in state court a similar complaint related to the same
foreclosure against Wells Fargo Bank, N.A.; Deutsche Bank National Trust Company as
“Trustee” for Soundview Home Loan Trust 2006-WF1 Asset Backed Certificates, Series 2006WF1; Equity Trustees, LLC; and Bierman, Geesing, Ward & Wood, LLC. Defendants removed
that case to this Court, and I dismissed Plaintiffs’ complaint with prejudice on March 27, 2012.
Blick v. Wells Fargo Bank, N.A., No. 3:11-cv-00081, 2012 WL 1030137 (W.D. Va. 2012)
[hereinafter “Blick I”]. The Fourth Circuit subsequently affirmed on August 14, 2012. Blick v.
Wells Fargo Bank, N.A., 474 Fed. App’x 932 (4th Cir. 2012) (per curiam).
In this case, Plaintiffs allege basically the same facts they alleged in Blick I, but they
purport to bring their second action against the trust itself rather than against the trustee. They
base their claims on the following five “facts”: (1) The assignment to the trust “has no standing
because there has been no valid enforceable assignment to the trust;” (2) “The Trust Agreement
provides the only manner in which assets may be properly transferred to the trust and any act in
contravention of the trust agreement is void;” (3) “The Trust never properly acquired Blicks’
mortgage note and deed of trust. Therefore, the Trust cannot cure its fatal standing defect;” (4)
The UCC “provides for rescission of negotiation of an instrument;” and (5) “The Law of the
Land: The United States Constitution The Fourteenth Amendment—Section 1.” Plaintiffs note
parenthetically that facts 1, 2, and 3 have “been previously stated,” but facts 4 and 5 have “not
been previously argued.” Deutsche Bank argues that this suit is barred by res judicata and
should be dismissed with prejudice on that basis alone. Alternatively, Deutsche Bank argues that
Plaintiffs have once again failed to state a claim.
II. LEGAL STANDARD
“A motion to dismiss under Rule 12(b)(6) tests the sufficiency of a complaint . . . [I]t
does not resolve contests surrounding the facts, the merits of a claim, or the applicability of
defenses.” Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992). A court
considering dismissal under Rule 12(b)(6) must take the facts in the light most favorable to the
plaintiff. Schatz v. Rosenberg, 943 F.2d 485, 489 (4th Cir. 1991). Courts are not, however,
“bound to accept as true a legal conclusion couched as a factual allegation.” Ashcroft v. Iqbal,
129 S. Ct. 1937, 1949–50 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555
-2-
(2007)). Rather, to survive a motion to dismiss, a complaint must contain enough factual
allegations to “state a claim for relief that is plausible on its face.” Twombly, 550 U.S. at 570. In
evaluating “plausibility,” the court may not rely on mere “labels and conclusions” or a plaintiff’s
“formulaic recitation of a cause of the elements of a cause of action.” Id. at 555. Instead, the
factual allegations must be enough to raise “a right to relief above the speculative level.” Id.
Thus, a “claim has facial plausibility when the plaintiff pleads factual content that allows the
court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”
Iqbal, 129 S. Ct. at 1949.
In order to allow for the development of a potentially meritorious claim, federal courts
have an obligation to construe pro se pleadings liberally. See, e.g., Boag v. MacDougall, 454
U.S. 364, 365 (1982) (citation omitted). Moreover, “[l]iberal construction of the pleadings is
particularly appropriate where . . . there is a pro se complaint raising civil rights issues.” Smith v.
Smith, 589 F.3d 736, 738 (4th Cir. 2009) (quoting Loe v. Armistead, 582 F.2d 1291, 1295 (4th
Cir. 1978)). Nevertheless, “[p]rinciples requiring generous construction of pro se complaints are
not . . . without limits.” Beaudett v. City of Hampton, 775 F.2d 1274, 1278 (4th Cir. 1985).
III. DISCUSSION
When a defendant seeks to dismiss a suit based on res judicata (i.e., claim preclusion)
and the original suit was decided by a federal court exercising diversity jurisdiction, the court
deciding the preclusion issue must apply the law of the state in which the first federal court sits.
See Semtek Int’l Inc. v. Lockheed Martin Corp., 531 U.S. 497, 508 (2001); Q Intern. Courier Inc.
v. Smoak, 441 F.3d 214, 218 (4th Cir. 2006). The Blicks’ original suit was decided by a federal
court sitting in Virginia, so Virginia law applies when deciding whether the new suit is
precluded.
-3-
Rule 1:6 of the Rules of the Supreme Court of Virginia addresses “Res Judicata Claim
Preclusion,” and provides that:
A party whose claim for relief arising from identified conduct, a transaction, or an
occurrence, is decided on the merits by a final judgment, shall be forever barred
from prosecuting any second or subsequent civil action against the same opposing
party or parties on any claim or cause of action that arises from that same conduct,
transaction or occurrence, whether or not the legal theory or rights asserted in the
second or subsequent action were raised in the prior lawsuit, and regardless of the
legal elements or the evidence upon which any claims in the prior proceeding
depended, or the particular remedies sought.
While Virginia law previously required that the party seeking to show claim preclusion
demonstrate that the later claim required the same evidence and sought the same remedy as the
earlier claim, “[b]y promulgating Rule 1:6, the Supreme Court of Virginia has discarded the
same-evidence and same-remedy requirements, adopting instead a same ‘conduct, transaction, or
occurrence’ test.” Martin-Bangura v. Va. Dept. of Mental Health, 640 F. Supp. 2d 729, 738
(E.D. Va. 2009); see also Ghayyada v. Rector and Visitors of Univ. of Va., No. 3:11-cv-00037,
2011 WL 4024799, at *4 n.5 (W.D. Va. Sept. 12, 2011). Under Rule 1:6, Defendant must show
that: (1) there was a prior claim for relief decided on the merits by a valid and final judgment; (2)
the parties are identical or in privity with each other; and (3) the claim made in the later suit
arises from the same conduct, transaction, or occurrence as the claim in the first suit.
Blick I clearly constituted a final judgment on the merits. I dismissed with prejudice all
of Plaintiff’s claims for failure to state a claim, and the Fourth Circuit affirmed. The next
issue—the identity of the parties—is somewhat more complicated. Plaintiffs allege that this
action is against a new party—the trust itself rather than the trustee. Defendant responds that
under Virginia law, a trustee lacks the capacity to sue and be sued. Since a trust is neither an
individual nor a corporation, Federal Rule of Civil Procedure 17(b)(3) applies in determining its
capacity to sue and be sued. Rule 17(b)(3) provides that the law of the state where the court is
-4-
located shall determine whether a party has the capacity to sue or be sued. Under Virginia law,
“[u]nless a statute expressly provides otherwise, a trust as such cannot sue or be sued; actions
must be brought by or against the trustees.” 1-5 Sinclair and Middleditch, Virginia Civil
Procedure § 5.10 (5th ed. 2008) (citing Yonce v. Miners Mem. Hosp. Ass’n, 161 F. Supp. 178
(W.D. Va. 1958)).
Deutsche Bank argues that § 8.01-6.3 of the Virginia Code requires that the trustee be
substituted as the proper defendant. Section 8.01-6.3 provides:
A. In any action or suit required to be prosecuted or defended by or in the name
of a fiduciary, including a personal representative, trustee, conservator, or
guardian, the style of the case in regard to the fiduciary shall be substantially in
the following form: “(Name of fiduciary), (type of fiduciary relationship), (Name
of the subject of the fiduciary relationship).
B. Any pleading filed that does not conform to the requirements of subsection A
but otherwise identifies the proper parties shall be amended on the motion of any
party or by the court on its own motion. Such amendment relates back to the date
of the original pleading.
While Virginia law applies in determining whether a trust has the capacity to be sued,
substitution of a party appears to be a matter of procedure that should be governed by federal law
under Erie R. Co. v. Tompkins, 304 U.S. 64 (1938). Federal Rule of Civil Procedure 21 provides
that “[o]n motion or on its own, the court may at any time, on just terms, add or drop a party.”
Because Virginia law does not permit a suit against a trust in the absence of specific statutory
authorization, I find that the trust is not the proper defendant in this case, but rather the trustee is.
Pursuant to Rule 21, I therefore drop the trust, Soundview Home Loan Trust 2006-WF1, as a
party, and add as a party the trustee, Deutsche Bank. As a result, I find that both this case and
Blick I were brought against the same party, Deutsche Bank, thus satisfying the res judicata
requirement that the later case be brought against the same party as the earlier case.
-5-
Even if Virginia law permitted the Blicks to sue the trustee as distinct from the trust, I
find that res judicata would still apply because the trust and the trustee are in privity. See Smith v.
Ware, 421 S.E.2d 444, 445 (Va. 1992) (noting that res judicata applies to causes of action
“which could have been litigated between the same parties and their privies”) (emphasis added).
Under Virginia law:
There is no single fixed definition of privity for purposes of res judicata. Whether
privity exists is determined on a case by case examination of the relationship and
interests of the parties. The touchstone of privity for purposes of res judicata is
that a party's interest is so identical with another that representation by one party
is representation of the other's legal right.
State Water Control Board v. Smithfield Foods, Inc., 542 S.E.2d 766, 769 (Va. 2001). To
establish privity, there must exist some relationship between the parties that would have
permitted one to assert the legal rights of the other in the original suit. See Rawlings v. Lopez,
591 S.E.2d 691, 692 (Va. 2004); see also Columbia Gas Transmission, LLC v. David N. Martin
Revocable Trust, 833 F. Sup. 2d 552, 558 (E.D. Va. 2011) (“Virginia courts typically find privity
when the parties share a contractual relationship, owe some kind of legal duty to each other, or
have another legal relationship such as co-ownership.”). Privity exists in this case because the
whole purpose of a trustee is to represent the interests of the trust. The trustee, a defendant in
Blick I, was bound by its fiduciary duty to represent the exact interests of the trust that are at
stake in this new suit. As a result, even if the defendants in the two suits were not identical, they
would nevertheless be in privity, which under Virginia law satisfies the identity requirement of
res judicata.
The final requirement for applying res judicata is that the claims in the later suit arise
from the same “conduct, transaction, or occurrence” as those in the first suit. Defendants note
that in both of their cases, the Blicks present their claims as actions to quiet title and seek the
-6-
same relief—that the Court declare the deed of trust and note void and enjoin foreclosure.
Moreover, res judicata bars not only claims that were in fact brought in the earlier suit, but also
those that could have been litigated. See Martin-Bangura, 640 F. Supp. 2d at 738 (quoting
Ware, 421 S.E.2d at 445).
Plaintiffs contend that they have brought a new cause of action despite explicitly stating
in their complaint that they have previously argued three of the five “Facts” that appear to
summarize why they believe foreclosure is unlawful. After acknowledging that Virginia’s “nonjudicial foreclosure laws do not require foreclosing entities to prove their ‘standing’ or authority
to foreclose in a court of law prior to foreclosure,” Plaintiffs say that in their new suit they have
“allege[d] superior title over a Trust represented by a Trustee by whom the Plaintiffs allege gross
misconduct and dereliction of duty.” Plaintiffs further aver that “Plaintiffs’ new cause of action
can best be stated as: Virginia’s non-judicial foreclosure laws are a violation of Blick’s Civil
Rights as guaranteed under the Fourth and Fourteenth Amendments to the Constitution of the
United States.” However, even taking Plaintiffs at their word, the two “Facts” that have not been
previously argued both rely on the same underlying conduct or transaction as those in their first
case—namely, the assignment and securitization of their loan. Regardless of whether these new
claims have merit, it appears that they could have been brought in the first case, and thus satisfy
Virginia’s same transaction requirement for res judicata.
IV. CONCLUSION
I find that Deutsche Bank has satisfied all of the requirements for res judicata, and I will
therefore grant the motion to dismiss. Although Plaintiffs have requested leave to amend, I find
that amendment in this case would be futile, both because of the res judicata issues discussed in
this opinion and because, as I ruled in Blick I, the substance of the Blicks’ claims lacks any
-7-
support in the law. Therefore, I will grant Deutsche Bank’s request to dismiss this case with
prejudice. An appropriate order accompanies this memorandum opinion.
The Clerk of the Court is hereby directed to send a certified copy of this memorandum
opinion and the accompanying order to all counsel of record and to Plaintiffs.
10th
Entered this ________ day of January, 2013.
-8-
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?